Is There Now An Opportunity In Ningbo Tuopu Group Co.,Ltd. (SHSE:601689)?

Ningbo Tuopu Group Co.,Ltd. (SHSE:601689), might not be a large cap stock, but it led the SHSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Ningbo Tuopu GroupLtd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Ningbo Tuopu GroupLtd

Is Ningbo Tuopu GroupLtd Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Ningbo Tuopu GroupLtd’s ratio of 30.66x is trading slightly above its industry peers’ ratio of 28.25x, which means if you buy Ningbo Tuopu GroupLtd today, you’d be paying a relatively sensible price for it. And if you believe that Ningbo Tuopu GroupLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Ningbo Tuopu GroupLtd’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Ningbo Tuopu GroupLtd?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Ningbo Tuopu GroupLtd's earnings over the next few years are expected to increase by 68%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 601689’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 601689? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 601689, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 601689, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Ningbo Tuopu GroupLtd you should be aware of.

If you are no longer interested in Ningbo Tuopu GroupLtd, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.